Toyota taking risk by double-teaming Insight with current and new Prius

TOKYO -- The hybrid battle between Honda and Toyota could be getting a lot hotter.

Toyota Motor Corp. plans to keep selling the current version of its Prius hybrid alongside the third generation after the new Prius debuts later this year, a newspaper reports. The strategy: Slash the sticker price on the current Prius so it can go head to head with Hondas cheaper Insight hybrid.

It is the best evidence yet that Toyota is worried about Honda Motor Co.s new rival. But Toyota is also taking a big risk in putting a 5-year-old model up against a new contender.

Toyota declined to comment on the report. But Japans Nikkei newspaper said the current Prius will stay in showrooms and be priced to compete with the Insight -- around $20,000.

The current Prius costs around $24,000. And the third generation, unveiled at this months Detroit auto show, is expected to cost more.

The current and new Prius will be sold next to each other after the new version is released in May, the Nikkei said. It didnt specify whether this was a Japan-only policy.

Honda had hoped the Insight would scoop a yet-untapped low-end market for hybrids. But Toyota apparently doesnt want to surrender that crown without a fight. Its answer is to make the current Prius cheaper by simplifying the interior, the Nikkei says.

The question is, how enticing will it be?

The fresh Insight undoubtedly will have more cachet among image-conscious, eco-minded drivers. Why be seen driving a car that has been on the road for half a decade?

Another problem facing Toyota: Potential buyers of the redesigned Prius may opt for the lower-end current generation. After all, it still gets great fuel economy.

With gasoline far below the highs of last year, customers will see less reason to spend big on hybrids. That goes for the new Prius, even if it does eke out 50 mpg as opposed to 46.

More important, it shows that Honda may be on to something in taking cheaper hybrids to the masses. While Toyota and Nissan roll out ever-bigger and more expensive hybrids, Honda is making them tinier and more affordable. It is even planning a hybrid version of the Fit.

A giant like Toyota may have its fingers in everything from full-sized pickups to luxury sedans. But keeping the current Prius in action concedes that at least one segment was overlooked.